- Jim Grant op-ed: The best financial reform? Let the bankers fail (WaPo)
- Goldman gambles as lawyers say bank should settle with SEC (Bloomberg)
- What Chinese Wall? Goldman role in Lloyds deal in spotlight (FT)
- Probe of Goldman director turns to Buffett deal (WSJ)
- Goldman 'doing god's work' (National Post)
- Soros: America must face up to the dangers of derivatives (FT)
- Durable goods down, on 67% plunge in demand for commercial aircraft (Census Bureau, Bloomberg)
- Big bonuses are back. Backlash isn't (Fortune)
After tightening to 540 bps, Greek-German 10 Year spreads are now back to 570 bps. The final outcome at this rate would still be a sovereign bankruptcy, but one which would have the US algos smiling all the way to the bank as they surge on every piece of good news and ignore the bad (a Greek Chapter 11 means billions in advisory fees for Wall Street - buy). At least the global market has said that at this point a Greek bankruptcy is a certainty. All those covering EUR shorts may want to reconsider.
The biggest non-news of the morning, that Greece has formally requested aid, which of course manages to spike idiotic US stocks as per usual, was that Greece formally requested aid. Yeah, nobody saw that coming. The issue is this proves absolutely nothing, with the EURUSD moving a tad higher and with Greek bonds still in the 8% range. What the futures gunners don't care about is that the activation mechanism remains unchanged and still needs the formal approval of Germany, which as we pointed out yesterday has now seen major opposition political parties step ahead of the process, in essence blocking the entire rescue. But who cares: the dollar is slightly weaker and all the carry traders are going nuts, so buy, buy, buy.
- Euro, Asian finance stocks fall on Greece concerns.
- Eurostat agency suggested Greece's debt crisis is worse than investors believed.
- Geithner harnesses G-20 behind Yuan push as India, Brazil raise pressure.
- Greece may seek Euro-region bridge loan as $11.3B redemption looms.
- Japan's bank minister not too keen on financial regulation.
- Air China swings to profit in 2009 of $709.4M on fuel hedging gains.
- Amazon.com's Q1 profit jumped 68% to $299M on a 46% rise in revs to $7.13B.
RANsquawk European Morning Briefing - Stocks, Bonds, FX 23/04/10
Another Goldman Lawsuit Imminent? From The Mail Bag: Lehman To Sue One Or More Big Banks Over Derivatives "Fraudulent Transfer"Submitted by Tyler Durden on 04/22/2010 - 23:26
A week ago we disclosed the unredacted Volume 5 of the Valukas report, in which the full details of the Lehman derivative portfolio were presented, as well as the names of "white knights" who stepped in in the last moment to onboard Lehman's holdings at a firesale valuation. Furthermore, it was Valukas' conclusion that Lehman may have a claim to sue the counterparties for fraudulent transfer. It appears this is precisely what is about to happen. We just received the following tip:
Lehman Holdings will be filing a lawsuit against one or more major banks in regards to the valuation of derivatives. This will occur tomorrow or Monday. It is the first such lawsuit (valuation dispute) of its kind by Lehman. Some of the counterparts to Lehman's existing trades weren't willing to play nice, so the "estate" felt it necessary to rack up another few thousand billable hours and take this battle to court.
One of the notable observations in recent Treasury auctions has been the increasing participation by commercial banks in taking down 10 and 30 Year Treasury auctions - traditionally two parts on the curve banks have historically avoided like the plague. We present some observations on why this may be happening as well as some troubling conclusions, both of which indicate trouble, namely that liquidity is and has been the name of the game for the past 13 months, and that commercial banks, or presumably some of the smarter money around, are seeing economic distress ahead.
World markets are beating the victory drums that finally the idiots in America have shut down the algos and everyone else can get back to reality. The first effect: after closing north of 1.33, the euro is now in free fall mode, plunging to 1.3216, slicing through every imaginable stop like butter as the world has said "enough" to the bullshit market action out of the US, which, like a petulant child, refuses to acknowledge anything and everything negative. All the stops at 1.3250 just got taken out causing a 50 pip drop in seconds. The next level of stops at 1.315 will likely be tested as Asia opens, but these are weak and any real resistance will be found below 1.31. The all critical Euro-Yen pair is down to 123.6 from 124.4 late on Thursday when the math Ph.D.'s had the market firmly under control. The DXY continues surging. Expect world market weakness overnight, translating into a drop of ES until just before the US market opens and the fume melt up resume again as America is now decoupled from every world market.
The recent crisis and instability in Kyrgyzstan, highlighted the fragility of security and the potential weakness of the political systems throughout the region and exposed new dimensions in the conduct of Kazakhstan’s foreign policy that may well prove pivotal for US energy interests in the Caspian Sea region. These complexities, often disguised or downplayed by the national governments in the region, attest to the deep political fault lines running through Eurasia as well as the potential for events in one state to ignite potential cross-border discontent and instability elsewhere.
The revolution in Kyrgyzstan came and went, and because the country is somewhere "over there" and doesn't have nice islands or a major oil stash, was promptly forgotten by the US media. Zero Hedge has been posting a series of articles on the situation there (courtesy of our friends at www.oilprice.com) and in fact will post the most recent article shortly. However, here is a useful primer on revolving door politics in developing countries: the fate of each member of the ruling party can be easily traced. On second thought, this is precisely what happens in the US, less bloodily, and without a Wall Street to redirect the output of the working class into the pockets of the "feudal casino-state" kleptocrats.
The wealth transfer continues: another $118 Billion in coupon issuance is coming up, the bulk of which will be bought up by Primary Dealers, repoed back to the Fed, and the resulting cash used to ramp stocks to new all time highs, generating short-term profits for the banks and another year of record bonuses as future US generations will experience the kinds of riots caused by debt mismanagement as Greece does today. Another $49 billion Bills will see the same fate. Also, with the first auction of 5 year TIPS since 2009, is someone telling us something? The Obama plan: Dow 36,000 by the mid-terms or else.In other news, the most recent unmanageable debt load per the DTS is $12,808,961,000,000. This is money that will not be repaid, and includes Trust Fund balances that are amortizing ever faster as America's entitlement state dream joins that of Greece.
Oil prices were under selling pressure in trading overnight, as traders in Europe and Asia were more concerned by the figures released this week by the DOE than their American counterparts had been. As has been the case quite often recently, the bigger part of the day’s move happened while US traders and investors were sleeping. Prices opened lower and they then traded at and around the new lower levels. The US dollar had been higher in trading overnight, and that continued in normal trading during the day. The DJIA was down rather substantially in the morning and precious metals were lower, as well, in what seemed to be a general repudiation of risk across all platforms.
Who would have thought triple digit forward P/Es were expensive? The company reported an operating income guidance for Q2 of $220-$320 versus expectations of $332. Guess not everybody is rushing to learn to read good. Time to start handing out free Kindles to Greeks so they can finally download books that define "austerity."
Well, dumb money is clearly at work today. With Greece basically on the brink of default, Spain, Portugal, Italy are begging to follow suit before people start realizing that disbanding the Eurozone might be inevitable. At the same time GDP would be still solidly negative if it were not for inventory rebuilding and government spending, and our entire financial industry (representing 20% of the earnings of the S&P and access to credit it generated has been the engine of growth for the past 30 years) is being exposed in the media as a fraud and threatened to be dismantled or at least turned into a shadow of its current self. No wonder then that last week the Nasdaq made highs in 21-day RSI that were not seen since December 1999. A 2.3% retracement is clearly the buying opportunity of a lifetime, especially since we are only up 82% since last March. Maybe I missed the part where growth prospects are booming when schools on the West coast only have money to be open 4 days a week. - Nic Lenoir of ICAP